Are Your Bank Accounts Safe?
February 21, 2008
The vast majority of people have their money deposited in FDIC insured banks, but a surprising large number of people have also deposited money into banks that are not insured by the Federal Deposit Insurance Corporation. For the most part, these are online banks.
In at least two recent bank failures of banks that were not protected by the FDIC, depositors lost money. These failures were at NetBank, Alpharetta, Georgia, and the Miami Valley Bank, Lakeview, Ohio.
The loss broke down like this: Of the nearly $109 million in uninsured deposits at NetBank, almost 30 percent of that has not yet been reimbursed to depositors.
Of the $14 million in uninsured funds held at Miami Valley, only 5.9 percent of those uninsured funds, to date, have been reimbursed.
Consumers should understand that the FDIC insurance limits have increased on certain accounts. Some retirement accounts, for instance, are now insured up to $250,000. This is up from $100,000 per person in the past.
The FDIC is working hard to protect depositors but it, too, has some new guidelines that may affect uninsured depositors. Congress sharply curtailed the FDIC’s discretion to extend protection beyond insured deposits. Under the new guidelines the FDIC must enter into the “least costly” transaction which means that the FDIC will not reimburse uninsured depositors if it means increasing the loss to the deposit insurance fund.
Consumers with funds in unprotected banks may need to reconsider the wisdom of that action